BY Mian Muhammad Ramzan, FCMA(PK), FAIA (UK) Principal - - PowerPoint PPT Presentation
UNDERSTANDING OF VAT IN UNITED ARAB EMIRATES BY Mian Muhammad Ramzan, FCMA(PK), FAIA (UK) Principal Consultant/Chief Executive, TMR CONSULTING Financial, Management & Tax Consultants Contact No . +971506204392, +971521549602 +923215224488
Mian Muhammad Ramzan, FCMA(PK), FAIA (UK) Principal Consultant/Chief Executive, TMR CONSULTING Financial, Management & Tax Consultants Contact No. +971506204392, +971521549602 +923215224488 (PK) UAE Office: MBC, 9th Floor, Conrad Tower, Sheikh Zaid Road, Dubai. E-mail: tmrcuae@tmrconsult.com Website: uae.tmrconsult.com
Presented by TMR Consulting
Presented by TMR Consulting
“VAT will be effective across the UAE from 1st January, 2018 at a standard rate of 5% and will be applicable on Goods and Services.
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QATAR BAHRAIN OMAN KUWAIT SAUDI ARABIA
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GCC Countries
Gulf Cooperation Council (GCC), political and economic alliance of six Middle Eastern countries . The GCC was established in Riyadh, Saudi Arabia, in May 1981.
UNITED ARAB EMIRATES
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VAT Rates in other Countries
Country Rate (%) Country Rate (%)
Germany 19 Ireland 23 Great Britain 20 Hungary 27 Greece 23 Denmark 25 Italy 22 Belgium 21 Switzerland 8 Austria 20 Turkey 18 Finland 24 Spain 21 Saudi Arabia 5 Portugal 23 Pakistan 17 Netherlands 21 Srilanka 12 Sweden 25 India 13.5
A value-added tax (VAT) is a type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. VAT applies to the majority of transactions of goods and services unless specifically exempted or excepted by law.
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VAT will provide UAE a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.
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Why VAT in UAE?
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Presented by TMR Consulting
Manufacturer Distributor Wholesaler/ Dealer Retailer/ Mini Wholesaler Consumer Raw Material Suppliers
How will VAT Work? Manufacturer Wholesaler Dealer Retailer Sell Buy Sell Buy Sell Buy Sell Price 1000 1000 1100 1100 1200 1200 1400 VAT (5%) +50
+55
+60
+70 Net VAT +50 +5 +5 +10 Tax Revenue for Government +70 Presented by TMR Consulting
Presented by TMR Consulting
Transaction Rate Amount in AED Input Tax (Tax on Purchases) Party A sells to Party B VAT charged to Party B Total Value of Supply 5% 1000.00 50 .00 1050.00 Output Tax (Tax on Sales) Party B sells above goods to Party C VAT charged to Party C Total Value of Supply 5% 1500.00 75.00 1575.00 Out put Tax (Tax on Sales) Input Tax (Tax on purchases) VAT payable by Party B 75.00 50.00 25.00
Exempt Zero-Rated Exempt goods are either not registered for VAT, or, if they are, the VAT costs cannot be reclaimed
them. In the case of those that are “zero-rated” the sale is not taxed and the supplier can reclaim the VAT costs
supplying the product.
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Taxable Items of VAT Zero-Rated Items of VAT
Platinum.
Services. Exempt Items of VAT
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Taxable, Exempt and Zero-Rated Items
A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000. If their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500 then a business may choose to register for VAT voluntarily . Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.
Threshold AED 375,000. Threshold exceeds AED 187,500. Presented by TMR Consulting
Presented by TMR Consulting
Some other Key Points
Vat will be applicable on goods and services, chargeable throughout the supply chain and on the imports of goods and services. The advertised Price of Goods shall include the VAT Two or more persons conducting businesses may apply for tax registration as a tax group. Tax Returns must be submitted on a regular basis (every three months) within 28 days of the end of the tax period. The registrant shall issue a tax invoice within 14 days as of the date of supply. Reverse Charge Mechanism Taxable persons must keep tax invoices issued and received for at least 5 years.
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Fines and Penalties
Fail to register within deadline AED 20,000. Fail to keep Financial and Tax Records AED 10,000 (1st time) and AED 50,000 (repetition). Fail to submit documents in Arabic AED 20,000. Fail to report any Amendment in Records to Tax Authorities AED 5,000 (1st time) and AED 15,000 on repetition. Tax evasion AED 500 up till triple of the value of the tax on the transaction under question. Delay in Tax Return Submission AED 1,000 (1st time) and AED 2,000 on repetition.
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Presented by TMR Consulting
Impact on VAT on Pricing
VAT being a consumption tax, tax burden is expected to reflect on the prices and consumption. On Taxable goods, the consumer prices will increase not only by 5%, other indirect costs due to VAT implementation will increase the prices further. Most food items will be subject to 5 per cent VAT rate, including basic goods. A major component of price increase linked to VAT The Prices of non taxable goods will also increase
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Impact on VAT on Pricing Cont…
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Other Indirect Costs
System Modifications Cost of Documentation
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Other Indirect Costs Cont…
Cost of Compliance Cost of Litigation
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OTHER IMPACTS
UAE had been considered one of the lucrative tax heavens which resulted more economic activity. May give a jerk to the economic activity.
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Presented by TMR Consulting